Business Rent Tax

Now is the Time to Begin Eliminating a Clear Competitive Disadvantage for Florida Businesses

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It would be difficult to find a more clear and widespread competitive disadvantage faced by many Florida businesses than the Business Rent Tax (BRT). Florida subjects commercial lease and license payments to the state and local sales tax and it is the only state in the nation that does so. This creates a government mandated increase of up to 8.0 percent in occupancy costs for all business that rent, a cost they would not incur in any other state (see Appendix for background and history of Florida’s sales tax and the BRT). Florida businesses pay more than $1.7 billion a year as a result of this tax.

Additionally, these rents are subject to the applicable local option sales tax, which can be as high as 2.0 percent. Local sales taxes can only apply to the first $5,000 of a sale of tangible property, but this cap does not apply to rents. The full amount of rent is taxable. Local taxes add another estimated $230 million.

If required by the lease, property taxes, as well as payments for services such as utilities, parking, and janitorial services may also be part of the taxable rent.

Florida TaxWatch released a study on the BRT in 2015 that analyzed the potential benefits of reducing/ eliminating the tax. This report is an update of that study. In addition to examining who pays the tax, the tax burden, and the potential tax savings, this report assesses the impact of the tax on the competitiveness of Florida businesses and the perception of Florida’s business climate. In addition, the myriad of different legislation addressing the BRT for consideration by the 2017 Florida Legislature is examined.

Other the last several years, Governor Rick Scott and the Florida Legislature have shown a commitment to both reducing taxes and improving the state’s business climate. A reduction in the BRT has been considered, and despite broad support, it has failed to happen, largely due to concerns over the fiscal impact of a significant reduction and competition for other tax cuts and spending priorities. In 2017, the debate is on again.

The Author

Kurt Wenner, Vice President of Research. Kurt has authored all of the major tax publications produced by Florida TaxWatch, including pieces on Florida’s Intangibles Tax, and general sales, property, and business tax issues.